Why Economic Empowerment and Diversity Should Matter to Investors

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February is Black History Month: a time to reflect on achievement and progress. It’s also an opportunity to consider how economic empowerment shapes not only communities, but the broader economy investors rely on for growth.

At its core, investing depends on participation. Thriving markets require entrepreneurs who can access capital, workers who can build stable careers, consumers who can spend and save, and leaders who can innovate. When large segments of the population face barriers to opportunity, the economy operates below its full potential. Over time, that affects business formation, job growth, productivity, and ultimately, investment returns.

That’s why economic empowerment and diversity are not just social conversations, but also they are economic ones.

Economic Empowerment as a Growth Multiplier

Economic empowerment centers on access: access to education, stable employment, financial literacy, entrepreneurship, and capital.[i] These building blocks allow individuals to move from subsistence to stability, and from stability to wealth creation.

When these foundations are strong, communities generate businesses, expand local economies, and increase consumer demand. When they are weak or unevenly distributed, wealth gaps persist and economic growth slows.

Consider this: while Black entrepreneurship in the United States has grown meaningfully in recent years, the racial wealth gap remains significant.[ii] That gap represents more than disparity; it also represents unrealized economic capacity. Fewer assets mean less investment participation, less small business capital, and less long-term compounding.

For investors, broader participation means broader markets. It means more customers, more innovation, more business creation, and deeper capital markets.[iii]

Diversity as a Competitive Advantage

Diversity in leadership and workforce composition has increasingly been associated with stronger innovation and performance outcomes. Companies that draw from broader perspectives tend to better understand shifting demographics, evolving consumer needs, and emerging risks.[iv]

Organizations that cultivate inclusive cultures are often better positioned to attract and retain talent, reduce internal friction, and respond to market disruption. For long-term investors, these traits matter. They influence competitive positioning, earnings durability, and operational resilience.[v]

Diversity, when embedded at leadership and governance levels, can be a signal of forward-looking management and thoughtful decision-making, traits which investors consistently value.

Diversity and ESG Investing

Some investors choose to incorporate environmental, social, and governance (ESG) factors into their investment decisions. This strategy evaluates companies not just on traditional financial metrics, but also on how they manage material non-financial risks and opportunities. In doing so, ESG investing can influence how capital flows toward, or away from, economic empowerment and diversity.

• Environmental factors assess exposure to climate risks and resource efficiency.
• Social factors examine how companies treat employees, support diversity and inclusion, manage supply chains, and impact communities.
• Governance factors evaluate board structure, transparency, accountability, and ethical oversight.

For those who prioritize these considerations, ESG can serve as one lens through which to evaluate how businesses approach inclusion, governance, and long-term sustainability.

However, ESG is just one approach. Many investors evaluate economic empowerment and diversity themes more broadly through macroeconomic analysis, company fundamentals, or targeted investment strategies.

Opportunity Zones: A Practical Example

At Larson, one way we’ve helped align investment strategy with community impact is through select Opportunity Zone investments offered through Larson Capital Management.

Opportunity Zones were established under the Tax Cuts and Jobs Act of 2017 to encourage long-term private investment in federally designated, economically distressed communities.[vi] Accredited investors who reinvest eligible capital gains into a Qualified Opportunity Fund (QOF) may receive meaningful tax advantages such as the deferral of original capital gains and, if held for the required period (generally at least 10 years), potential exclusion of appreciation generated within the Opportunity Zone investment.

From a practical standpoint, these investments often support:

• Multifamily housing developments
• Commercial or mixed-use real estate
• Business expansion in underinvested areas
• Infrastructure and redevelopment projects

Many of these zones are located in historically underserved or predominantly minority neighborhoods. By directing capital into these areas, Opportunity Zone investments aim to stimulate job creation, economic revitalization, and long-term development while offering compelling tax benefits for investors who meet program requirements.

It is important to note that Opportunity Zone investments are typically structured as private placements and are available only to accredited investors. According to the SEC, an accredited investor generally includes someone who:

• Earned income exceeding $200,000 individually (or $300,000 jointly with a spouse or spousal equivalent) in each of the two most recent years and reasonably expects the same in the current year; or,
• Has a net worth exceeding $1 million, individually or jointly with a spouse or spousal equivalent, excluding the value of a primary residence.

Private placement securities are speculative, illiquid, and carry a high degree of risk, including the possible loss of the entire investment.

Opportunity Zones are one example of how capital can be directed toward economically distressed communities while maintaining a disciplined investment framework. As with any strategy, suitability depends on individual financial circumstances, objectives, and risk tolerance.

Why This Matters Long-Term

According to McKinsey & Company, economic empowerment and diversity matter because they influence returns, volatility, and downside risk:

• Economies with broader participation grow larger and more resilient over time.
• Companies with inclusive leadership are more likely to innovate and outperform peers.
• Weak diversity and governance practices increasingly signal reputational, legal, and talent risks.

Economic inclusion, therefore, is not a political idea: it’s an economic one.

When more individuals can participate fully in the workforce, access capital, build businesses, and accumulate wealth, the entire economic ecosystem strengthens. Broader participation leads to deeper capital markets, more resilient companies, and expanded opportunity.

Black History Month reminds us that progress in economic empowerment has required intention, investment, and persistence. For investors focused on long-term growth, understanding these forces helps illuminate where opportunity may expand and where structural risks may linger.

At Larson, our focus remains on thoughtful, disciplined investing grounded in long-term fundamentals. If themes like economic empowerment, Opportunity Zones, or values-based considerations are meaningful to you, your advisor can help explore how they could fit within your broader strategy.

[i] https://www.weforum.org/stories/2025/01/resilient-inclusive-economies-diversity-equity-inclusion/

[ii] https://home.treasury.gov/system/files/306/24-Racial-Equity-Progress-Report-FINAL-update-508.pdf

[iii] https://www.epi.org/publication/inequalitys-drag-on-aggregate-demand/

[iv] https://www.mckinsey.com/featured-insights/diversity-and-inclusion/diversity-matters-even-more-the-case-for-holistic-impact

[v] https://www.bcg.com/publications/2018/how-diverse-leadership-teams-boost-innovation

[vi] https://www.hud.gov/opportunity-zones

Advisory Services offered through Larson Financial Group, LLC, a Registered Investment Advisor. Securities offered through Larson Financial Securities, LLC, Member FINRA/SIPC. Larson Financial Group, LLC, Larson Financial Securities, LLC and their representatives do not provide legal or tax advice or services. Please consult the appropriate professional regarding your legal or tax planning needs.

Investment advisory services are provided by Larson Capital Management, LLC, an investment advisor registered with the Securities and Exchange Commission. All securities involve risk and may result in significant losses. Investing in private placements also requires long-term commitments.